A firm’s capital portfolio consists of 15% loans, 15% bonds, 50% common stock, and 20% retained earnings. The loans have

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899603
Joined: Mon Aug 02, 2021 8:13 am

A firm’s capital portfolio consists of 15% loans, 15% bonds, 50% common stock, and 20% retained earnings. The loans have

Post by answerhappygod »

A firm’s capital portfolio consists of 15% loans, 15% bonds, 50%common stock, and 20% retained earnings. The loans have an annualbefore-tax effective rate of 8%, the bonds have an annualbefore-tax effective rate of 8%, the common stock has an after-taxcost of capital of 12%, and the firm’s income tax rate is 40%. Whatis its after-tax cost of capital?
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Top
Post Reply

Return to “Archived Questions & Answers”